Latest / The Investor With Joel Palathinkal / Rishi Ratan: Venture Associate at In-Q-Tel (the CIA's Venture Fund)

Transcript

Rishi Ratan: Venture Associate at In-Q-Tel (the CIA's Venture Fund) · The Investor With Joel Palathinkal

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Very much of an impact oriented investor.
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They primarily are looking to invest in founders and companies that are looking to.
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Make a difference in the world in whatever application they're doing so a lot of these
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companies that you would you would see you know are in their portfolio are some of the top
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unicorn status companies as well, like Deepgram, Markforged, Advanced Navigation.
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They're thematic investors.
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Get into they have two different, I would say, broad areas of investing.
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One is on your traditional enterprise software side.
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The other is on what they call field technologies.
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So I worked in the field technologies area.
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Field technologies to cover for you is what VCs typically call deep tech, hard tech.
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So it's bands across commercial space satellites, additive manufacturing, AI.
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Welcome to The Investor, a podcast where I, Joel Palafinkel, your host, dives deep into the
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minds of the world's most influential institutional investors.
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In each episode, we sit down with an investor to hear about their journeys and how global
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markets are driving capital allocation.
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So join us on this journey as we explore these insights.
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All right, I think we are live.
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So Rishi, welcome to the program.
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There's a couple of people popping in.
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So what we were just talking about was, I was kinda prepping Rishi before I started this
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episode and he was complimenting me on my jacket.
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So my wife hates this jacket, but hey, she doesn't have to be on the show right now.
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She's in the other room, so hopefully she didn't hear that.
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Hopefully she got a good chuckle out of this.
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So cool man, super excited to chat with you.
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We chatted briefly about literally about the VC program a few weeks I'm like, know what, you
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should just like teach my class and just be a speaker, you're too advanced.
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But why don't we do what I did with Jordan?
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Tell me about your background, your childhood.
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So you grew up, so Rishi knows one of my past speakers, Jordan Caron, who's currently at a
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family office.
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And it's funny just how small the community is, right?
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You see speakers and people at common events in the investor community, they end up being
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related to you or they end up being a childhood friend.
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So awesome parallel there.
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I'll definitely say hi to Jordan for you.
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But so you grew up in Long Island, right?
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Yeah, so I had a bit of an interesting journey.
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So I grew up half my life in India, the other half in The US.
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So
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my dad used to be in the Indian Navy.
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So I kind of was a military kid growing up in India, grew up and spent the first ten years in
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New Delhi.
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Next was two years briefly in Mumbai and then came out to The US started off in Jersey City
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for a brief stint for two months when I first arrived to The US.
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But then after that, spent like the all of my high school like ninth through twelfth grade in
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JIP High School in Long Island.
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So it's good to be back for me to to New York City as well.
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Nice.
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So, So so you went to high school in Long Island.
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And then what did you study in college?
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Where'd you go to college?
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Yes, I went to University of Illinois or Banner Champaign to study electrical and computer
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engineering.
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So did my undergrad and then subsequently did my master's as well in electrical and computer
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engineering.
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Like I of I pursued electrical engineering because I was always interested in like kind of
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electronics and I would say still am in my VC path as well.
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It just had an appeal to me.
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Wanted I really liked hardware and Illinois was one of those schools like, you know, the
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transistor has been invented and has been built by Illinois.
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First sound and film from UIUC.
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So there's a lot of history on the circuit side there.
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So that really appealed to me.
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And I started off in the same vein, first, I would say third of my career kind of working as
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an engineer because I felt like that was kind of the fundamental training That really helped
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define like how I think about products, how I think of all of my systems knowledge.
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Sorry I was trying to mute somebody and I muted you.
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Okay.
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Sorry.
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No worries.
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Everybody go on mute please.
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Thanks.
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Cool.
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So, yeah, I mean like, so yeah, started off my first, you know, training in engineering, did a
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couple of internships at Qualcomm worked.
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Now you're talking about five gs I was working on back then the advanced LTE group and then
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the corporate R and D working on five gs like small cells.
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So it's I've been like very fortunate to kind of see the development of like what I worked on
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like almost nine years ago come into fruition almost now.
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And then as I was about to start my full time journey, I joined the Surface Group at
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Microsoft primarily because I wanted to sort of get a little bit of a feel of a startup, but
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also a big company.
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When I joined Surface, it was a 30 person team.
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It was one of the it was a great time, was a surface had just gone through a $1,000,000,000
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write down so so they were.
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But the CEO Satya was very committed to the vision and you know you've seen the fruition of
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that over the last, I would say six, seven years.
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But back in 2013, it was one of those things where you could have gone anyway.
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That exhilaration was very exciting to me.
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I felt that this was an area I could probably get a lot of domain expertise and you know
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build some cool products.
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So I'm talking to you from one of my prototype devices from Surface.
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Oh nice.
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Tell me a little bit about Satya because I watched a talk recently with Jason Kalicatis.
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Yes.
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And they were talking about Bezos and how people are afraid of Bezos whenever he goes
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into a new space.
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When he goes in, he goes hard and he goes with conviction, right?
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So whenever he's if he's doing pharmaceutical drug delivery, I mean, he's all in with
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conviction.
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So that's how Bezos is, but tell me about Sethi because he really transformed Microsoft to
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really be a cloud company, right?
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Everything, I mean, went to cloud everything was- More
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than even a cloud company, I wouldn't even take it one step back.
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So when I joined Microsoft, Satya had just been CEO for, I think, six weeks or eight weeks,
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something like that.
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But still fundamentally, company was quite different than what it is today.
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I will say to your viewers that I spent five years at Microsoft, but I am no longer
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affiliated with them.
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So these are just like my learnings You're an independent idea.
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So I will give a little bit of public service announcement.
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But yeah, no, I think one of the biggest things that Satya did and still continuing to do that
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has really led Microsoft to be kind of this cloud first company as you just rightfully
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talked about it, is taking all these disparate business units within Microsoft and aligning
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them onto one fundamental vision and culture.
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And that was kind of a very big thing to do because Microsoft in many ways pre 2013 before
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Satya joined was a conglomeration of many small companies into one big giant umbrella.
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And they all kind of had a separate roadmap, separate kind of working style, different
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cultures and getting them all aligned into the same, I would say, core strategy and the
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network effect vision.
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I think that was the biggest value add that Satya could do.
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Then cloud is kind of that ultimate conglomeration of all of these disparate
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things.
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You start from Windows, devices, Office, LinkedIn, all of the different IoT and AI
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services, and they all tie into the cloud.
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So I think that is like a big thing that a lot of people generally don't see.
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And Microsoft has just been doing all this in kind of the background.
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Sure, yeah, that makes sense.
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And where do you think Microsoft is heading just in your personal opinion?
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They're doing the cloud.
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They're across all the devices, everything's I think a big thing, because I worked in FinTech
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and we looked at Microsoft as And an a big thing with productivity is continuity.
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So a lot of times the worker of the future is gonna be at his desk and then he's probably
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gonna have two or three workflows on mobile and maybe on a tablet, right?
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Most tablet devices don't have a data plan, you still need to be connected to WiFi.
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Cell phones you do have data, but it's a smaller screen and you're probably not gonna be
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doing real detailed work.
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So with that in mind, definitely need to think through UX and UI.
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But what's next, do you think, for Microsoft?
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Yeah, I think it's on, I would say, I classify it on three fronts.
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So at the base layer, I think it is the interact the interaction medium.
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The interaction medium here spans from the devices you interact with.
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So that is where kind of like the hardware comes in.
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You would have seen some of the flavors of this, not just in the Surface devices, but kind
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of Microsoft's like work that's been happening on the HoloLens side with them pushing the
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boundaries in augmented reality and also these new dual screen devices that are coming like
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Surface Duo.
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The main kind of thesis here is that.
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As you said, like the worker of the future is going to have multiple interaction mediums and
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you want a device that can span across many different functions for a user in different
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ways.
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So first is the hardware layer of having a lot of variety for different types of users.
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The second is kind of the software layer in the interaction piece, which is like what you have
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known Microsoft as like Windows and Office.
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But really it is Windows, Office, and I will even add Xbox all kind of like sharing the same
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code base now.
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And all of them kind of like seamlessly interacting whether you are on an iPhone,
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whether you're on an Android phone, whether you're on a Surface, whether you're on an OEM
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like a Dell PC, whether you're on like a TV, like all of your experiences that you know,
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this is something that you know, I would say Microsoft learned from Apple that Apple has
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done a really good job at.
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So that that's I would say the first layer, which is like getting you being involved in
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your journey across whatever medium of interaction.
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The second layer with their with their focused on is more around kind of the.
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The back end and I would say what is known as the modern workplace initiative in Microsoft,
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which is the productivity layer.
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So this is where your office and your, I would say, all of the dynamic services, all your
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interactions that you do with your IT in a company.
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Microsoft wants to eliminate IT as a function overall for companies.
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They want it to be very seamless, you know, Sutton Fund, for example, like if you are going
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and scaling a five person company into a 10,000 person company, IT should not be a hurdle.
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You should be focused on kind of your core business and like let kind of Microsoft or even
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Google is also getting into this, take care of the IT functions for you.
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Now, so that is the second layer.
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The third layer where they're really kind of like spending a lot of the focus and
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trailblazing is kind of on the applications of artificial intelligence and the connectivity to
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the cloud.
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And this is basically what is the powerhouse that makes all of the other three bottom two
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layers actually function seamlessly.
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So that is where Microsoft has spent a lot of focus and initiatives on quantum computing.
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They're investing heavily in not just building a scalable quantum computer, also teaching,
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bringing on developers on board onto their quantum platform and already allowing companies
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to use their classical computing data centers along with their computing prototypes.
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So I think that is a function that Microsoft is going into where they're trying to take
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computing and democratizing that across industries.
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So like that is something that like that you know when you asked earlier about Satya's
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vision, what makes him special is that.
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He really fundamentally drives and believes in empowering every person and organization on the
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planet to do more and achieve more.
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Yeah.
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Like that mission statement that Microsoft has all the products really like try to embody that
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mission.
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Sure, that was really helpful.
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So that's a great story on evolution with technology and just a company growing.
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Let's switch gears and talk about the evolution of you.
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So I have a similar background.
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I don't know if you know, but I also was a double A.
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Was an electrical engineer and then I pivoted into product and then got into VC.
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I think you had a very similar.
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I had a very, yeah.
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I'm almost like ten, fifteen years behind you.
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Yeah, yeah, you're like the, I'm like you like from the future.
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Yes.
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But, so maybe you can tell the audience because pivoting is, you know, as you know, quite And a
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we both have done the pivot twice in two different industries.
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So I think it's even difficult to get into product because it's very similar to VC where
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there's no real degree there's no, that's very opaque as far as like how you break in.
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Yeah, it's also a chicken and egg.
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So I mean, I would not say I'm an expert in any ways as well, but some things some trends that
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I underlying things that I would say that have worked for me and I've seen work for a lot of
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my mentors and people I have mentored in the past is you have to go down at the base level
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of what is your motivation and what drives you and interests you.
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Then when you start there, always have to have like I would say like whether you're a product
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manager or a VC, there always needs to be like one like layer of like core competence that
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like fundamentally makes you a little bit unique and that you are a, I would not say a
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domain expert, you are somewhat of a subject matter expert in some area.
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You use that as a as a lever.
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Also, I would say a way to break in into these fields so I can.
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For example, like for me, like.
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My like background experience and interests all kind of the common thread was kind of hardware
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consumer electronic products.
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I wanted to so when I was like trying to break into product management that was something
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that.
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I could use as like I would say an advantage in breaking into product management within
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surface, for instance.
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And yes, it helped that I was already I'd already worked as an engineer and shipped a
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couple of products as an engineer.
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So it helped me kind of bring kind of that I would say system engineering knowledge to the
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ground, because every product manager needs to have a superpower.
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You're either.
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The best at being the voice of the customer you're either someone who can help the
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engineering team relate to the product features and be on board with the vision and implement
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the product in a timely manner or you are someone who can really work with the marketing
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and the business teams to take the product vision and roadmap and kind of outbound use
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that as a customer acquisition funnel.
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You need to have like some like I would say lever that you bring to the table that really
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differentiates you.
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Yeah, totally agree.
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Think it's the same with VC as well.
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So I think VC product and tech are superpowers, but I've interviewed almost like 100 VCs now
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and there's many VCs that are lawyers.
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And I guess that's great for term sheets.
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Yes.
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So I think we all kind of our own.
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And then I think if you come from a certain industry, so we have some actually some medical
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professionals in And this those people I think would be great for digital health.
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Any kind of sector focused industry, having that industry background really helps us
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superpower.
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Would say, I don't know if you agree with that.
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I completely agree with that.
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And I think like, you know, think get on to the VC side yet but even for VC like I would say,
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like, You know, if you were to just look at even from a mathematical standpoint, most VCs
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are not actually like getting the returns that you would you would automatically associate
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when you hear the term VC too.
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But I think that the ones who are very successful and you have had so much experience
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in this do take a very thesis driven approach and a thematic approach.
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And I think that is another thing when you're breaking into VC as well.
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You should look at VC as more of an embodiment of all your past experiences rather than a new
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industry that is like shiny and cool you just want to break into.
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Yeah, agree.
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It looks like Josh has a question here.
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Can you clarify what you mean by thesis driven approach?
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Yeah, so what I mean by this is, so I'll use the example that Joel used by digital health.
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So digital health is, it's a made up term, but it is also a thesis.
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The thesis here is that health care is going to involve is going to leverage and utilize
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technology in various different aspects, whether it be kind of you see from
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telemedicine, whether it be kind of you as a patient being interacting with your own health
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records on the digital platforms that you already use.
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Like there's the spectrum is quite wide but taking this that thesis here is that there will
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be an intersection point between healthcare and technology and you want to be in that sweet
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spot.
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As a VC you have to be like be able to like look at the world around you and then see where
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the trends are going to go and then be one of the first movers into capitalizing on that
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trend.
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So that's what I meant by taking that thesis approach of being kind of, I would say, first
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to market, even second to market.
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Like a lot of times we use like doing you.
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It's the pattern matching thing that Joel has interviewed several VCs.
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They would all say this.
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So it can sound cliche, but it really is true that you have to be able to see the trends and
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be able to have that conviction that you're going to bet on something and go all in.
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Yeah, and also at the same point, know when to move out.
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Yeah, and I think there are a lot of people talk about gut based investing using your gut.
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But a lot of times the gut is not enough.
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Feel like
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got the data.
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Yeah, the data and I think the data really you have to do the unsexy stuff of just talking to
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hundreds of companies.
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Because you can look at like CB Insights, you can go on Crunchbase and PitchBook and find a
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lot of great quant data, but you're only really gonna I feel
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like by the time things get to that point, you're already like, I would say a little bit
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behind in
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Yeah, I agree.
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Yeah, and I think you learn a lot from just talking to other VCs.
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So secretly when I talk to so many other VCs, it's like a new lesson for me because I think
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the thematic approach to this is what I would say, it's how you see the world because I may
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think digital health is a certain way and that's like my thesis, but Rishi may be
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completely, he just may see the world completely differently and disagree and that's
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fine because we all have to have our own thesis and have conviction on that.
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That's what I would say.
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Yeah, and then the other thing I also like think that VC is little bit of a very much of a
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close knit community that the best way to succeed at VC is to talk to other VCs and
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entrepreneurs and engineers.
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It is not a zero sum game.
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Although sometimes when you look in the media, it may seem like that.
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But it really is an industry where collaboration is kind of the biggest problem.
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Yeah.
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And I think if you can meet VCs to share notes on, I think Rishi and I literally just chatted
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this morning about like a space We were like, hey, what do you think about space?
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And you just learn insights.
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I spoke to a family office that focuses on space and they were telling me that launch is
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great.
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It's a great space, but it's just a small fraction of the whole space When you think
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about payloads and doing multi mission travel, just launch is like such a small but you don't
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pick up those insights from just reading.
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Even I would say like so I mean, could talk about a deal briefly like probably not a deal,
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say but I'll talk about industry because some of the deals from my background are not
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publicly disclosed.
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I would say like even on the space side, as an example, propulsion, for instance, is a big
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focus right now within the industry because you saw that you saw a lot of the launch vehicles,
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I would say a lot of these companies that you take rocket lab, take Capella, a lot of them do
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end up like leveraging SpaceX or now like Amazon's Blue Origin Blue Origin.
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Well, also Kuiper Kuiper is also Bezos, as you said, like, you know, there's a very blurry
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line, whether it's Amazon Coiper is blue origin or it's like little cross pollination both.
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But one of the things, one of the, I would say, low hanging fruit areas is this propulsion
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systems because there's a big flurry in electric propulsion.
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Because what that does for you is, and lot of these entrepreneurs are actually all ex SpaceX,
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ex NASA folks who have kind of been able to come into the private sector and productize
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their their innovations that they were passionate about.
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Sure.
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And the cool aspect in this space is that what electric propulsion systems do is they unlock
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an absolutely new frontier in space.
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A lot of a lot of the satellites that you hear about right now are low Earth orbit or kind of
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just deep space.
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Yeah.
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And but there's another emerging area called very low orbit.
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And that is something that is still untapped.
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That's where a lot of the like Blue Origin, for example, and SpaceX, one of their next big
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projects is to start operating the very low Earth orbit.
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And the reason why that's so powerful is because you're still in that atmospheric zone
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where you can harvest atmospheric oxygen as a fuel propellant source.
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Okay.
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And electro propulsion systems are kind of the way to do that.
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Sure.
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So chemical partial systems like you still get into this kind of a, I would say, roadblock
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that you're limited in your spaceflight journey by the amount of propellant that you can store
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in your in your satellite.
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But in an electric propulsion system, you're able to use the ambient oxygen from the
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atmosphere, and then you can just be in that zone forever.
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So
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there, what are some of the applications with very low orbit?
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That's just for clarification, that's closer to the earth, right?
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Yeah, so it is around the 700 kilometer, 2,000 kilometer kind of zone.
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Like right above the stratosphere.
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You can still have satellites in that space?
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Yeah.
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So the cool thing about this is that the way like most applications for this are powerful is
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that one of the areas that and I'm sorry I'm going into like very much deep space here.
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But I've been passionate about this area for a while.
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But what's interesting is that you would hear so a lot of these mega constellations that are
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operating in low Earth orbit, just like all the satellites that are already in orbit right now.
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Space junk is one of the big challenges.
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And what that does is that it creates problems for future space missions.
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And also has a problem that you can have accidents by with space debris.
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So very low Earth orbit is a way for satellites to come in and out of the Earth's atmosphere
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seamlessly.
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So they come back to the very low Earth orbit orbital pathway kind of to refill up on fuel.
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Then they go back up into the traditional low Earth orbit.
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They can remove satellites can start removing some of these dormant space junk satellites in
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there, bring them back down to the earth safely instead of them just like crashing.
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Then the other thing is that it also is going to give a lot more.
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I would say, real estate ecosystem and opportunity for company for initiatives like
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Starlink, where you're trying to give Internet connectivity to areas where fiber optic or even
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like cell towers are not able to reach.
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In the low Earth orbit space, because you have that mobility to move around from one location
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to the other.
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An example I'll give to you is Astrandis.
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Astrandis is a space company which is kind of giving focusing on Alaska right now and giving
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satellite connectivity to regions of Alaska that have not had internet for like fifty
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years.
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And
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one of the cool things about this is that they're not a very low orbit satellite, but
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once they start tapping in, a customer of satellite companies that make very low orbit
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products.
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But what's cool is that now the latency is that much smaller.
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So what that advantage gives you can have like gigabit levels of internet connectivity
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anywhere around the world.
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Yeah, that's interesting.
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And that's great.
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And then I know we got around thirty minutes.
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I think one thing I'd love to talk about is, thanks for that additional detail on space.
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I'm super excited about going deep on that area too.
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We'd need another hour to go on that topic, which we should do.
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I know a few other space VCs, so maybe we can actually do a panel on that.
29:59
But I'd love to talk about you know, your final pivot into venture and In Q and I think you
30:08
might have a couple slides that you're allowed to share on just on kinda your investment
30:15
thesis and possibly some things on In Q Tel or is it more just general VC slides?
30:21
Yes, those are like kind of more like general deep tech.
30:23
Okay, yeah, that's fine.
30:24
Deep tech slides.
30:25
Yeah, I know everything's probably a lot classified.
30:28
So whatever you're allowed to talk about and if you have anything on Deep Tech, I can
30:34
definitely make you a presenter and maybe fly through a couple of those slides and then maybe
30:38
leave like five minutes for questions at the end.
30:41
Sure, one sec.
30:44
I'll make you a co host.
30:48
And yeah, maybe are you allowed to possibly just give an overview of what In Q Tel is and
30:52
what their focus is?
30:54
Okay.
30:54
Yeah.
30:55
So, yeah, I was summer associate in In Q Tel, We're on their venture investment team.
31:02
So In Q Tel is a non for profit strategic investor that invests in cutting edge startups
31:09
and technologies on the behalf of the CIA and also 11 other intelligence agencies on behalf
31:18
of the US government.
31:19
So it is, you know, you can go on iqt.org, you can look at all the portfolios, like it's been
31:26
a very active investor over the last twenty years.
31:29
Do about 55 deals a year, which is, you you can almost look at like a deal a week.
31:37
And are they based in DC in Virginia or they did have a presence in New York as well?
31:42
Yes, In Q Tel is actually a global presence now.
31:48
There they have three main offices, one in Arlington in Washington DC.
31:55
Yeah, the second in Menlo Park, third in Boston, Waltham, Massachusetts, actually.
32:03
And then they have they recently opened up over the last year and a half international offices
32:08
in London and in Sydney.
32:10
Oh, wow.
32:11
Beyond the US government, In Q Tel has also expanded relations to the UK government and the
32:18
Australian and New Zealand governments Great. As
32:21
As So the thesis I'll start with kind of like the main kind of say high, I would say the
32:27
higher level thesis and try to like put my slide.
32:31
Yeah, sure.
33:14
My apologies.
33:15
It's, taking a Didn't
33:18
mean to put you on the spot.
33:21
No worries.
33:22
Yeah, my bad.
33:23
I actually had initially thought that, that slide deck was more for your class.
33:28
Oh, my bad.
33:29
I hadn't, I hadn't opened it up before I called today.
33:33
That's okay.
33:47
So I don't know.
33:48
Do you guys see my screen?
33:50
Yep.
33:50
I can see it.
33:51
Okay.
33:51
Great.
33:59
Do you still see it?
34:00
Yep.
34:04
Cool.
34:05
Yes.
34:05
This is just, again, a background about me.
34:06
So I'll probably, spend in the interest of time the first, like, three or four slides, and then
34:12
we can do a bigger debrief in one of your classes.
34:16
Sure, yeah that would be great.
34:17
So In Q Tel, as I said, is a strategic investor for the intelligence agencies.
34:26
These are right here On the on the bottom right, you will see all the different agencies
34:33
that In Q Tel supports.
34:35
And you can see some of the prominent portfolio companies that you would have heard of Palantir
34:41
in recent times with the with the direct listing that's just gone up.
34:45
Palantir was one of the first investments I think you tell me like back in 1999.
34:51
So the fund was established in '99 primarily at the tail end of the Clinton administration
34:58
because there was fundamentally a shift happening in the way innovation is taking place
35:04
in The US.
35:06
And I would say globally, but like especially in Silicon Valley at a time where a lot of the
35:12
innovation was actually coming from startups and venture partners investing in these
35:18
startups than kind of research labs that the US government up until then tapping into mostly.
35:26
So at that time, the director of the CIA help established In Q Tel as kind of a private not
35:35
for profit entity, so it can work across these three different industries across government
35:44
partners, the venture capital industry, then kind of startups.
35:48
So that was kind of like the genesis and thesis behind In Q Tel's existence and kind of what
35:53
their mission is focused on.
35:55
They're very much of an impact oriented investor.
35:58
They primarily are looking to invest in founders and companies that are looking to.
36:10
Make a difference in the world in whatever application they're doing so a lot of these
36:15
companies that you would you would see you know are in their portfolio are some of the top
36:20
unicorn status companies as well, like Deepgram, Mark Ford, Advanced Navigation.
36:28
They're an early they're thematic investors.
36:31
Get into they have two different, I would say, broad areas of investing.
36:36
Is on your traditional enterprise software side.
36:41
Other is on what they call field technologies, so I worked in the field technologies area
36:46
Field technologies to cover for you is what VCs typically call deep tech, hard tech.
36:54
So it spans across commercial space satellites, additive manufacturing, AI and edge computing,
37:01
autonomous systems, wireless communications, synthetic biology.
37:07
First, the question would be a lot of you will be like, well, this all these things seem like
37:14
so much of buzzwords.
37:16
Do you how do you kind of differentiate between like hype versus something of substance here?
37:23
And so that is kind of the biggest thing that ends up becoming a challenge.
37:28
Which is why I have this quote here that deep tech is objectively a function of technology
37:38
market and then execution.
37:40
That is more so important in this area than I would say the traditional software service
37:45
companies because.
37:48
The technical aspect and then also market timing and execution can play a very, very deep
37:54
fundamental role in whether a company or even a founder will be successful.
38:00
Yeah.
38:01
And at the end of the day, like the for the for the in the venture industry, you know, Even if
38:06
you're an impact investor you you financial returns are just come our nature of the game,
38:14
they they come to the job so these do tend to be very important because you have to you have
38:20
to at the end of the day, think that I will only invest in a company.
38:23
If I do see at the end of a high upside for return, so you would not even if it's a
38:28
strategic investment you wouldn't necessarily invest in a company unless you could see that
38:33
founder and the company being successful.
38:37
So this is a.
38:39
I have you know the one of the biggest deep tech investors in the world as sosv and I'm not
38:48
sure, Joe I think you may have already.
38:51
Interviewed someone from there or from Hacks, I could be mistaken.
38:55
I do, yeah, I know one of the founders of IndieBio.
38:59
Oh, nice.
38:59
And one of my buddies knows Sean O'Sullivan, so I'd love to get on the show.
39:03
But yeah, this deck, if you go, I think for the audience, if you go to SOSV Deep Tech Trends,
39:10
they have like a 200 page deck that I think they keep updated.
39:14
Right, and so this is from their latest deck that I felt like was one of the best slides
39:19
I've seen put together that really show the impact of like you know deep tech is no longer
39:26
just one of those like nebulous terms that are like science fiction like you one out of five
39:32
unicorns can be classified into a deep tech company.
39:37
And you know the biggest thing that I will say is that.
39:41
All the fortune 500 companies in the next wave, you know a big.
39:47
Like driving quote that I like that came in this pandemic timeframe was from Marc
39:52
Andreessen when he said that The US needs to get back into building and deep tech founders
40:00
and investors are fundamentally driven by companies that want to build physical things.
40:08
Sure.
40:10
What are your thoughts on just because you mentioned synthetic bio?
40:13
Yes.
40:14
Are you guys looking at like lab grown tissue and tissue engineering?
40:18
Yeah, In Q Tel has been a has an investor in a lot of these life sciences companies like
40:29
Ginkgo Bioworks, for example.
40:33
So the lab grown tissue and like there's a lot of investment as you have invested actually
40:41
Joel in the past in these alternative like meatless companies.
40:46
So
40:47
that is definitely a big area, but they're also working beyond that kind of on the genomic side
40:56
on kind of, I would say lab grown organs side of things as well, like beyond kind of
41:07
bioprinting.
41:09
So they have bioprinting for organs.
41:11
Then I think one thing that I'm seeing now is for lab grown meats having a component system.
41:18
So there's a company that's like looking at crustaceans and yeah, I can send it to you
41:23
later, but they can create a component which is like the lobster tail.
41:28
And then Oh they can, yeah.
41:30
They're actually cool.
41:32
Each of those different components have different value.
41:35
So I've been seeing some of that stuff, it's pretty interesting.
41:38
Gotcha, and sorry I was looking away because I had put your video on my second monitor.
41:44
Oh no, no worries.
41:45
And I was I'm not sure like do you see your yourself also in the screen.
41:51
I see I see I see both of us and I see your deck.
41:55
Alright, cool.
41:55
I'll remove that then.
41:58
Cool.
41:59
So the next thing I wanted to yeah, know we were short on time, I'll just like cover
42:05
briefly.
42:06
I think everyone is kind of bought into the driving forces.
42:10
But I do want to spend some time kind of on the growth opportunities in this space, because I
42:15
think for your cohort numbers and also listeners, as I said, there's a lot of hype in
42:23
these areas, and it's hard to often differentiate between what is, I would say, a
42:32
good trend or a good company or a founder versus Companies like, you know, Nicola, for
42:42
example, right now that are that are in the news for some of the wrong reasons.
42:47
So the way I would say this is my these are my thoughts that they're they're driven a lot by
42:57
by what In Q Tel is focused on as well.
43:01
I would kind of classify into these three areas of like big growth opportunities.
43:08
On the application and content creation platform side like this is more.
43:14
The way I would classify this kind of is is that spatial computing and that worker of the
43:19
future that we talked about earlier that computing is no longer going to be limited to
43:24
kind of your dedicated PC tablet or phone.
43:29
The three d pipeline space that is really interesting because there are a lot of
43:35
companies like spatial being one of them that are working on.
43:43
It sounds like science fiction, like bringing like immersive three d holograms or immersive
43:49
augmented reality applications to your everyday life.
43:56
And you can already see like you know big companies like Facebook with their recent
43:59
announcements on Oculus series, Microsoft with HoloLens, they're all trying to like tap into
44:05
the space.
44:05
Of the biggest companies I would say from the startup land that is both a cautionary tale,
44:13
but also one of the earliest, I would say, innovators is Magic So I use cautionary tale
44:18
because Magic Leap like, you know, had huge investment rounds, promised a lot, but then
44:25
ended up falling a little bit prey to just the execution aspect of that equation that I showed
44:31
earlier.
44:32
So they had all the tech probably good to market, but the execution was something that
44:38
they struggled with.
44:39
So that is why, like in deep tech investing like one of the things that is very important
44:44
is how you always want to be bullish and VCs will often like not invest in a company if they
44:52
are not shown kind of a broad lofty application possibilities.
44:59
But as an investor, always have to be the one who is coaching and also tempering your
45:06
founding team on building a roadmap that is achievable and kind of lowers that path towards
45:16
profitability because if the company is not going to be able to make money at least having
45:22
a path towards it then a lot of the lofty goals will never be achieved.
45:27
And that's where most of the deep tech companies end up like falling.
45:33
Second area on the deep learning and quantum side, so this is exciting.
45:37
In terms of computing because I think there we've been through you as an electrical
45:45
engineer also will appreciate kind of the Moore's law.
45:51
Would say approach of building transistors and like writing the wave of computation.
45:57
I think we're we're coming towards the fringe sides of that now as you would see from you
46:05
know Intel's latest struggles with their yield as well in their chipsets for next generation
46:11
silicon.
46:13
But one of the great things, and this is where AI deep learning and hardware intersecting and
46:23
quantum to a certain degree as well, is that because we have all this data now, we can now
46:31
transform our view of the world from the Von Neumann architecture of building computers to
46:38
now looking at building chips.
46:41
That take more of an approach like you know GPUs are taking of parallel computing and
46:46
leveraging that all that big data that we have available to have very specific application
46:54
centric ICs and I think this is very important is because.
46:58
A lot of the stuff that you see like I'll go back to my one in five deep tech slide.
47:06
A lot of these companies that you're seeing on the IoT or even like the crypto mining sites
47:13
where like you know this trend started from cryptocurrencies is that.
47:21
You don't need to rely on GPUs and CPUs to do like machine learning computation.
47:28
And in fact, like an application specific integrated circuit is in many ways cheaper and
47:34
more efficient.
47:35
That is a wave that is, I would say there's a lot of good companies in this area that are
47:41
going to continue to thrive.
47:45
I'll give you a couple of recent ones that would be good for your audience if they're
47:51
interested like Synchant, for instance, is a company.
47:55
That Microsoft does a venture arm M12 just invested in early summer, and it is playing
48:02
directly in this APPLA AI.
48:06
Deep learning edge hardware chipsets sure.
48:11
Quantum is the way that ties in into this area, I think, is more from the standpoint that.
48:19
It coming back that earlier conversation we had earlier on the data centers and cloud
48:23
computing.
48:25
Quantum is is unlocks this new possibility of.
48:31
High computational power for specific applications, but low power consumption, and I
48:38
think that the biggest bottleneck that we're seeing and this will go back to kind of the
48:42
environment concept as well is that.
48:45
We're like data centers with the amount of electricity they're consuming, know they're a
48:52
big toll on our environment right now and quantum computing is not only a way for us to
48:58
look for new energy sources through new applications of new chemical discoveries in the
49:06
chemistry and biochemistry space, but also a way for us to reduce energy consumption for our
49:14
day to day computational powers.
49:17
And the last area that the reason that this is where I would say most VCs are still playing in
49:22
this third bucket.
49:23
And this is where most of the economic returns and the near term possibilities lie are in the
49:33
computation and I would say productivity data scenarios.
49:39
The container containerized application ecosystem, bringing down, you would have heard
49:45
edge computing as a big term thrown away, turn around in the space right now.
49:51
The whole idea here is essentially the latency of processing everything on the cloud is just
49:57
not scalable.
49:58
So bringing some of that computational power back to and the edge here is just like you
50:04
know, in a device.
50:06
That is something that is of huge value and can you know unlock a lot of new possibilities all
50:14
the way from like self driving cars to like precision agriculture.
50:19
And the data management piece, I think this is something that we're most, if you were to look
50:24
into like, know, in the enterprise software, like investment trends within containers and
50:30
data management, you'll probably get like 80% of the recent investments in enterprise
50:34
software.
50:35
The reason is because that data management is with the proliferation of big data that we
50:42
have, is so much more difficult right now to be able to.
50:48
Effectively, I would say, manage all the different data streams that it is just there's
50:55
so many problems to still be solved there, so I think these are the things that I would say are
51:01
huge drivers I'll end my last slide.
51:04
Kind of on the this, this is kind of the fundamental investing thing that you would have
51:11
shown to your players, But I say that in deep tech investment game, this cycle that looks
51:22
very theoretical, you go from reinvesting right into fundraising is a little bit more
51:28
elongated.
51:29
I think in deep tech investing, one of the things to be aware of is from the time you
51:37
write your first check, you have to be willing to take a bet on that company for up to ten
51:43
years.
51:43
I'll take the example of Palantir, for example, like Palantir, yes, they've been profitable, I
51:49
would say for the last six to seven years looking at
51:55
their
51:55
S1.
51:57
But that a bet that the early investor of Palantir had to take back in '99.
52:05
And I would say one thing I would add to this is sometimes it's more than ten years.
52:09
So it's almost sometimes it's like the life cycle of like two
52:12
funds.
52:12
So,
52:13
right.
52:13
Yeah, or even like the fund.
52:15
So the fund might only be like a seven year fund.
52:17
Yeah.
52:17
The technology takes like thirteen years to commercialize.
52:22
So then as a fund manager, what do you do, right?
52:24
I mean, you have to figure out if you want to if you're an evergreen fund, that's great.
52:29
But if you're a seven year termed fund, the challenge is kind of like how do you get out?
52:34
How do you get liquidity?
52:36
Exactly.
52:36
Sometimes you got secondaries.
52:39
I'll end with this slide for you and we'll take like, sorry, five minutes for questions.
52:43
Yeah, sure.
52:44
Which is like when you're picking a company, you always have to think about it.
52:49
I put it in this matrix format, which is, are you going in from a strategic lens or are you
52:55
going it from a technology or just investment trend lens?
53:03
And you have to always be sure of which where you lie on this matrix and have that conviction
53:09
whenever you're making the investment.
53:10
So I'll end it.
53:11
I'll end my sharing here and leave like five minutes for questions from you or from any of
53:16
your audience.
53:17
Yeah, was great.
53:19
Hey guys, you guys got any questions?
53:32
Can you guys hear me?
53:36
So Josh, Smith, you guys got any questions?
53:42
Hi,
53:43
Well, go ahead.
53:45
Oh, I was gonna say, how do you manage with risks?
53:51
I guess they're all pretty well vetted, but I always wonder when you're in forward and onward
53:58
looking into maybe it's very basic from my standpoint, but you know how do you manage with
54:05
risks when you're heavily invested in the more progressive.
54:14
Technologies, so yeah.
54:17
That's a that's a great point Honestly, think that is you would hear this a lot from VCs
54:23
saying at the early stage, team is one of the biggest drivers they're investing in.
54:29
Then I would say market and problem.
54:32
But in this area, team really becomes very much more important, and that is kind of like how
54:39
you're managing your risk a lot.
54:41
And so you're looking for founders who, in addition to having that passion and conviction
54:48
for the problem area that you're solving, but also have a deep expertise in some aspect that
54:55
is going to be very important to executing on the vision of the company.
54:59
So that is one, but then the second part which a lot of people end up struggling with is the
55:08
founder's ability to surround themselves with folks who have complementary skills, especially
55:14
on the business side.
55:15
Lot of these companies in this area are originating in research labs and engineers who
55:26
have worked in industry for a while.
55:28
So you have to have a team in which.
55:32
There's a healthy balance between a technologist and a business referral and here
55:39
it's like where the sales and marketing.
55:42
Aspects become very important because for these companies to be successful, they have to be
55:47
going in and evangelizing their technology to customers and then often times in the beginning
55:53
when VCs are investing, they know that the early pilots are not going be generating any
55:58
money.
55:59
So you have to have a balance between non recurring engineering work for companies and
56:07
doing pilots and evangelizing your product solutions.
56:12
So you can see them.
56:14
Then once you've shown a proof of concept after that it's like kind of, I would say it comes
56:20
back to how any other company would operate, you're writing the growth rate.
56:24
But the initial stage, you have to have a very much of a targeted and strategic approach.
56:31
And the founder needs to be very good at storytelling and kind of just tying the
56:37
technology down to a customer That is like a lot of the customers, I think Josh mentioned a
56:44
deep tech dental company.
56:46
I actually heard about that company yesterday in your mentorship chat Joel.
56:52
Like that is an example, I forget what it's called now, but they have a computer vision
56:59
application for being able to scan people's dental x rays or whatever.
57:06
And I think those are areas where.
57:10
The customer problem and the customer experience is kind of the most important thing
57:15
and the computer vision like technology, the deep learning algorithms are more kind of I
57:20
would say ancillary and they're just like table stakes.
57:24
Yeah, super helpful.
57:26
Well hey, know we're up for time.
57:28
Josh, if you got any questions feel free to jump in.
57:34
Feel free to jump in if you got one, if not, what I always do is I always ask one real quick
57:38
piece of advice.
57:40
So any piece of advice that you have in your career or your life that you wanna share, happy
57:45
to take that away with us.
57:46
Yeah, totally.
57:47
And I will say also like we ran out of time today, I'm happy to do a deep dive in any of
57:52
your classes for your students.
57:55
But the advice I'd give going back to kind of, I'd say how this would be more of a career
58:03
advice is try to figure out like what is your passion and driving you and this may sound
58:11
cliche but really use that as your biggest differentiator and power to break into whether
58:19
you're breaking into engineering, to product management, to VC.
58:24
Every given stage you should be like trying to always reinvent yourself and going and getting
58:32
a new skill or learning a new about a new area by building onto your passion.
58:38
Yeah, and real quick, guess, Josh, I think the last question if you got one minute.
58:43
How can deep tech VCs add value to their portfolio companies?
58:48
I guess developing the product, gaining customers business development, a deep tech
58:53
side, maybe that's different than
58:54
Yeah, I mean, I think those are definitely there.
58:57
I think one of the bigger things is in addition to that is being.
59:03
Would say.
59:06
Like all VCs job always is to be a little bit of hype person and like inspire the founder to
59:13
continue to push the limits.
59:14
But in deep tech, of the areas that VC should be doing a little bit more is coaching and
59:23
tempering a bit on the over commitments that a founder can get themselves into early on the
59:31
company's like evolution.
59:33
And always like bringing that lens of the customer voice, because I think it is a journey
59:42
in deep tech.
59:43
So the closer you are to solving the nuggets of whatever application your founder is working on
59:49
to a specific customer application, the faster you will get to that long term vision.
59:54
Sure.
59:56
Well, this was awesome.
59:57
Thank you so much Rishi.
59:58
Yeah, I know you're busy, so thanks for making time for us and we'll catch up soon.
1:00:02
Get you back in the class at some point.
1:00:04
Right, sounds good.
1:00:05
Take care guys.
1:00:05
Take care, bye.
1:00:06
Bye.